by Jason Bodner

May 25, 2021

Waiting is an annoying fact of life. According to one study, you’ll spend an average of two years of your life in lines. Studies also show that you’ll feel less anxious waiting in a single line than in multiple lines.

Waiting for stocks to move is not necessarily like waiting in line, but many investors, myself included, are waiting to know when this tech/growth sell-off will be over. While we’re waiting, we’re likely holding multiple stocks that may be down. This feels like “peak impatience and anxiety” for many investors.

Since the November Presidential election – which felt like a big reset – things have mostly been humming along just fine. The QQQ’s (the NASDAQ tracking ETF) rallied +25%. There was stock market cheer.

Then came February 12th and with it some stock market schizophrenia – in a series of waves:

  • The QQQ’s proceeded to drop 10.8% from February 12th until March 8th (15 trading days)
  • Then the tech heavy index staged a huge +12.3 % rally to new highs.
  • Then it promptly fell another -7.3% to its recent May 12 trough.
  • Then it surged +3%.
  • The QQQ’s now sit +9% higher than the March 8th

Invesco QQQ Trust Graph

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

The problem is this: Many of the outlier stocks with high growth potential haven’t yet participated.

No, let me correct that statement: Many of MY stocks have not yet participated. If you’re like me, you’ve been looking at your own portfolio, saying, “Where’s the beef?”

Recently, however, some good growth stocks suddenly seem to be breathing new life in the past few sessions. So, it’s a fair question: Is the growth pummeling over?

I only know one way to get the answers, and that’s by looking at the data. Sometimes, you have to look for data under the surface. Sometimes the story is told in the data under that data, like two layers down.

Last week gave me signs of possible optimism, but was it real? I had to dig two layers down to find my answer. What was it? Here’s a prime example of what I mean when I say data two layers down:

Last week, we saw 261 stock buys and 102 stock sells. That’s 72% buys, a strong reading and nice to see, but I wanted to see what else was happening beneath that. Remember, to get a buy signal in our model, not only do you need higher prices on big volume, but stocks also need to pierce a prior high of roughly 11 weeks. Many of the outlier stocks are far below that high. So, they are not reflected in this table: MAPSignals Sector Rankings

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

While this table tells us that there was heavy buying in Materials and Energy stocks, it only tells part of the story. Looking at last week’s stocks and ignoring buys and sells, I saw 2,800 stocks traded in a big way. That’s an average of 560 per day, which is right around average. With the QQQs finishing the week flat from the week before, what can we understand from these 2,800 stocks?

I collected all of them. I then filtered them, looking or stocks that scored well for strong fundamentals. I looked for stocks with strong 3-year sales and earnings growth. I was left with 686 stocks having high growth. Of those, 349 were positive for the week (up an average +4.6%). That means 12.5% of all Big Money Signals last week were for growth stocks getting bought. They broke down like this: BIG Money Signals

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Looked at in another light, I mentioned that tech stocks peaked on February 12th. So, I went and looked at all buy and sell signals since then and there were 5,109 of them. Of those, 1,302 were sells, or 25%. Of those 1,302 sells, there were 349 high-growth stocks getting bought last week but not yet high enough to make a signal. Put simply, 27% of all the stocks making sell signals since February 12 were trading higher on big volume last week… and they were growth companies.

It’s one thing to look at indexes staging what looks like a relief rally and breathe a sigh of relief. It’s quite another thing altogether to dig two layers deeper and find out that the stock market’s major abuse victims since February are visibly getting some much-needed love lately. It may be too early to tell if the bloodletting in growth stocks is over, but these are data-driven positive signs that I can get excited about.

One last thing: Remember that I said in order to make a buy signal stocks need to pierce above a roughly 11-week high. Well, 11 weeks ago this Monday was March 8th. That was the low for the QQQ’s. That means it will be easier for resurging growth stocks to make buy signals in the upcoming days and weeks.

By studying the market’s history and its patterns, we can start to formulate views on where things are going. Data since February has been ugly for growth stocks. But recent data is showing signs of promise and a potential reprieve. I intend to use this data to try and see where things are going.

After all, Wayne Gretzky, perhaps the best athlete of all time, said, “I skate to where the puck is going to be, not to where it has been.” Hockey Puck Photo

All content above represents the opinion of Jason Bodner of Navellier & Associates, Inc.

Please see important disclosures below.

Also In This Issue

A Look Ahead by Louis Navellier
Chances for Yellen’s “World Corporate Tax” Diminish

Income Mail by Bryan Perry
The Search for Green Energy-Related Income

Growth Mail by Gary Alexander
Some D.C. Economists are in Denial

Global Mail by Ivan Martchev
Sun Tzu Strikes Again, Blockchain-Style

Sector Spotlight by Jason Bodner
He Profits Most Who Learns How to Wisely Wait

View Full Archive
Read Past Issues Here

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